With No Progress, Brexit Talks May Go to October, Germany Warns

(Bloomberg) -- Britain will have to give up some sovereignty if it wants to reach a free-trade pact with the European Union, according to Germany's ambassador to the bloc, who warned the post-Brexit deliberations could drag on through October.

The two sides have made “no real progress” in talks on an agreement, according to Michael Clauss, who said that barrier-free access to the EU single market will require the U.K. to pay a political price.

“Is a deal possible? Yes, definitely,” Clauss told an online event on Thursday organized by the Brussels-based European Policy Centre. “But I think it also means that the U.K. needs to have a more realistic approach. To put it short: I think we cannot have full sovereignty and at the same time full access to the internal market.”

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An accord on future EU-U.K. ties is shaping up along with the European economic recovery from the coronavirus pandemic to be a top focus of the upcoming German presidency of the 27-nation bloc. Germany is due on July 1 to take over the EU's six-month rotating presidency from Croatia.

“If we get these two things done, I would say this will then be a remarkably successful presidency,” Clauss said. “This Brexit issue is going to absorb most of the political attention we expect in September and October.”

He reiterated the need to reach a free-trade pact this year because the U.K. seems unlikely to request a prolongation of the post-Brexit transition period. In that context, the effective deadline for an agreement is end-October in order to leave time for the subsequent formal approval steps before year-end, according to Clauss.

Under the terms of the U.K.'s withdrawal from the EU earlier this year, a transition period preserving the economic status quo runs until the end of 2020 and can be prolonged by as long as two years while both sides negotiate a free-trade deal. A decision to prolong the transition phase -- something U.K. Prime Minister Boris Johnson has ruled out -- would have to be taken by the middle of this year.

EU Looks to Johnson to Stop No-Deal Brexit With Talks Stuck

Failure to strike an accord by Dec. 31 would mean the return of tariffs and quotas as well as the imposition of bureaucratic barriers for businesses. Aviation, counter-terrorism cooperation and arrangements for people living and working in each other's countries all risk being left in limbo.

“This is a must-do,” Clauss said. “We work under the assumption the United Kingdom is not going to ask for an extension. That means a deal needs to be struck in the next six months.”